Bombardier Targets Investment Grade in Post-CSeries Cuts

By Frederic Tomesco -
Mar 21, 2013

Bombardier Inc. (BBD/B) will try to regain
an investment-grade credit rating as it pares new-product
spending after completing development of its CSeries jetliner.

The world’s third-largest planemaker is investing $2
billion on new aircraft programs for the second straight year in
2013 and predicted today the figure will drop to $1 billion in
2015. Along with the CSeries, its biggest jet ever, Bombardier
is developing aircraft including the Learjet 85, Global 7000 and
Global 8000 business aircraft.

“It’s really the leverage that makes the difference in
terms of the investment grade” rating, Chief Financial Officer
Pierre Alary told investors at a presentation in New York.
Bombardier seeks to cut its debt to 2.5 times earnings before
interest, taxes, depreciation and amortization from a multiple
of 5.5, and “will gradually get to that target, which should
permit us to regain our investment-grade rating,” he said.

“Having analyzed all the products we have and how we keep
them modern, we feel that at $1 billion for the company we can
keep our lines modern and competitive. As our revenues go up,
our margins go up and we reduce investment, we will generate
significant cash flow.”

Revenue will probably climb to $22 billion to $25 billion
in 2015 from $16.8 billion last year with the help of a record
backlog, Beaudoin said today. New products such as the CSeries
will provide an additional $10 billion to $16 billion a year
starting in 2017, he said.

The higher cash flow will be used in part to raise the
dividend, keeping it at a level comparable to manufacturing
peers, Beaudoin said. Industrial companies typically have a
dividend yield of 2 percent to 3 percent, he said.